When Randal Mercer and several commercial real estate brokers in Fort Myers and Naples flagged their operation as the latest CB Richard Ellis office 14 years ago, it was a prescient move.
“The market was growing so fast, and we knew then there was going to be a lot of incoming business,” says Stan Stouder, one of Mercer's partners in the Fort Myers-Naples office.
Indeed, national commercial real estate companies such as CB Richard Ellis over the subsequent years discovered Southwest Florida as population boomed. Their clients, many of whom were retailers following the population migration, drew them here.
Many of these national retailers hired global commercial real estate firms like CB Richard Ellis to find space for them in markets across the country. Under the affiliate program, CB Richard Ellis owned 6.4% of the Fort Myers-Naples office and the local partners owned the balance.
But as population growth slowed, the housing market stalled and the recession took hold five years ago, fewer national companies were establishing new locations in Southwest Florida. In recent years, CB Richard Ellis provided less than 10% of the Fort Myers-Naples affiliate's annual revenues (the partners decline to cite revenues or transaction volume).
“It's still a local market,” says Mercer. “All the tenants are local or regional. The deals we saw were local people.”
Meanwhile, for the privilege of carrying the CB Richard Ellis flag, the Fort Myers-Naples affiliate had to pay the parent firm quarterly fees, royalties and they had to split commissions with other brokers in the national organization. “The profit margin wasn't great,” acknowledges Larry Foster, the firm's managing partner.
So when the CB Richard Ellis contract came up for renewal late last year, the firm's five partners decided to strike out on their own, renaming their firm CRE Consultants.
Because of their 14-year affiliation with CB Richard Ellis, the Fort Myers-Naples partners say they aren't concerned that CB might establish an affiliate relationship with another group of brokers, and they expect to earn referrals for deals CB has in the area. The closest CB offices are in Tampa and Fort Lauderdale, and many deals aren't worth a broker's full-day drive from either city. “We know their systems and people,” says Stouder.
What's more, the move means CRE Consultants can now expand to markets they were previously excluded from by their contract with CB. “We're opening an office in Stuart,” says Stouder, noting that partner Scott Dunnuck is now heading that office in Martin County north of West Palm Beach on Florida's east coast.
Stouder says CRE Consultants is also scouting for opportunities in Sarasota. He says that office might be established via the acquisition of an existing firm, though he declined to elaborate further.
The five partners of CRE Consultants, which also includes Fred Kermani in Naples, say business has improved measurably in the last year and that the bottom in commercial real estate has passed. “Leasing was very strong in 2011,” says Stouder, who notes that the firm exceeded 2010 revenues by mid-August.
In addition, property management business has grown significantly in recent years, as lenders need professionals to manage buildings on which they've foreclosed. Property management now accounts for about 17% of the firm's revenues.